Oil Prices Climb as Russia Menaces Ukraine

Uncertainty drove oil prices higher on Sunday.

Oil prices were essentially flat over the last week as traders anticipated a potential nuclear deal with Iran that could allow the country to bring millions of gallons of oil to the market. Oil markets opened more than a dollar a barrel higher as tensions along the Russia-Ukraine border increased.

President Biden and other American officials have said that President Putin of Russia will invade Ukraine despite the threat of sanctions. Russian natural gas and oil shipments to parts of Europe would most likely be disrupted by an invasion, followed by a decline in purchases of Russian energy by the West. Negotiations continued on several fronts.

The United States and other industrialized countries will most likely release millions of barrels of oil from their strategic reserves as soon as an invasion occurs. Washington is considering suspending federal taxes on gasoline. At least for a short time, these measures could help restrain prices at the pump.

The average price of a gallon of gasoline in the US rose nearly 4 cents over the last week to $3.53 and is 90 cents higher than a year ago. The global oil price trends can be followed by a week or two.

The global benchmark price rose by less than a dollar a barrel last week despite the American benchmark oil price falling. Both benchmarks are above $90 a barrel.

The American oil benchmark, West Texas Intermediate, rose 2% to $92.73 a barrel, while the global benchmark was up 1.3 percent to $94.76 a barrel.

Russia is the third largest producer of oil in the world after the United States and Saudi Arabia, and the United States is not a big importer of Russian oil. Russian oil exports go mostly to Europe and Asia, and global markets are tight as production has not kept up with the economic rebound.

American oil production has increased in recent months, and Saudi Arabia and the United Arab Emirates are believed to have spare production capacity. It would take a nuclear deal with Iran to quickly send new barrels to global markets. Iran has as much as 80 million barrels in storage that it could sell quickly and ramp up production to 1.2 million barrels a day within eight months. If there is a war in Eastern Europe, that would not resolve shortages.